State political editor for The Age

THE state government has been forced to find an extra $750 million in a desperate scramble to keep its budget in surplus, hitting motorists with higher licence renewal fees, further squeezing the bureaucracy and toughening eligibility rules for the first home owner grant.

The budget update reveals the government now expects to deliver a modest $137 million surplus this financial year, with a massive cut to stamp duty collections ripping a $1 billion hole in tax revenue predictions since the May budget.

The state government has promised to keep the budget in the black by a minimum of $100 million, underpinning a political strategy that involves building a war chest of surplus to pay for future infrastructure without further debt.

But the strategy, which is also designed to protect Victoria's coveted triple-A credit rating, has forced the government to inflict more pain. The latest savings measures include clawing back an extra $109.2 million from motorists over the next four years through higher driver's licence renewal fees.

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Under the changes, a three-year renewal will increase from $50 to $70, a four-year renewal will rise from $66.70 to $93.38 and a 10-year renewal goes from $170 to $240.

Tougher first home owner grant rules - buyers have to live in their new dwelling at least a year rather than six months - will save $94.5 million over four years.

The government will also once again target the bureaucracy, after previously announcing 4200 job losses. Faster than expected take-up of voluntary redundancy packages is expected to save $125 million.

But it will also impose a new ''efficiency dividend'', requiring departments to deliver savings of 2 per cent a year to wages and other overheads. The budget update also reveals plans to save $75 million by offloading responsibility for government-owned aged-care beds to the private sector.

Premier Ted Baillieu said Victoria's finances were the strongest in Australia. ''Victoria is one of only two states in Australia forecasting budget surpluses over the forward estimates,'' he said.

But he also stepped up his attack on the Gillard government, blaming it for imposing major policies such as the National Disability Insurance Scheme and the Gonski education reforms without providing the states with the extra money needed to deliver them.

''You can't have all of these noble initiatives without having revenue streams to be able to pay for them,'' Mr Baillieu said. ''There are time bombs being planted into the forward estimates of the Commonwealth budget and state budgets and they are being planted by the Commonwealth.''

Shadow treasurer Tim Holding said: "The Baillieu government would have us believe that the $750 million of measures … will have no impact on front-line services but Victorians know this is not true,'' he said. ''Victorians have already witnessed a litany of front-line government services being cut as a consequence of Baillieu government savings measures.''

Community and Public Sector Union state secretary Karen Batt said it was ''suburban accountancy at best''. ''They've turned it into a stupid contest between building infrastructure and delivering services while wasting over $100 million packaging out axed staff to keep a $100 million surplus,'' she said.